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Quality Chasm

PERSPECTIVE

Purchasing Health Care: An Opportunity For A Public-Private Partnership

Abstract

 
By recommending that the federal government take a leadership role in driving quality improvement in the U.S. health care system, the Institute of Medicine has taken a bold step, one that signals a significant policy shift. Through regulations and payments, government incentives have a profound effect on the practices of hospitals, clinicians, and other institutions. Private-sector employers sponsor coverage for 165 million people, and they will want a substantial voice in government strategies and actions. This paper recommends that the two sectors formally develop a strategic partnership, mediated through two powerful advisory boards, one at the level of the HHS secretary and the other at the level of the CMS administrator.

Risks ahead. Calling on government to lead represents a major policy shift that requires thoughtful appraisal. There are significant risks in recommending that the government exert such influence over a system that is so heavily funded by private employers, and the way the government implements these recommendations will either exacerbate or alleviate these risks. However, private-sector employers believe that costs cannot be controlled without improving quality and that moving forward is less risky than standing still.

Consistency and coordination. Although both the private and public sectors have developed important innovations in health care design and delivery, they have most often worked in parallel. Collaboration has increased recently, and the IOM report recommends that it continue. The committee calls for coordination among government programs to ensure that providers receive consistent messages, but it contends that this consistency must extend to all purchasers. Groups can work together collegially, collaboratively, or strategically; private-sector experience indicates that coordination is assured and synergy encouraged only through strategic partnerships. Improving quality will require providers to work hard and take risks. Public and private purchasers must send similar market signals to ensure that the information shared with enrollees is consistent.

New structure needed. The federal government does not have a structure to support such a partnership; this paper recommends that it develop one. A purchaser advisory board at the level of the secretary of health and human services (HHS) should be created. This board should comprise private- and public-sector purchasers and consumers. Its proceedings should be transparent, as should all processes undertaken in the development and release of performance measurements and payment methodologies to reward quality and efficiency.

Given Medicare’s powerful effects on the delivery system, the Centers for Medicare and Medicaid Services (CMS) should adopt an influential advisory group as well, with purchasers and providers represented. To its credit, the CMS wants to move quickly, which requires confident decision making, but its exemplary goals will be frustrated if agreements with some sectors of the health care market are made without full disclosure to and the participation of all sectors. The CMS should also demonstrate consistent and strong support of the National Quality Forum (NQF), which has a governance structure designed to promote transparency and partnership.

Leadership in the health care sector clearly has its challenges. As the federal government proceeds to translate the recommendations in the IOM report into an operating plan, I offer some thoughts from the private sector.

Framework For Improvement

Top Framework For Improvement Developing Standardized... Publicly Releasing Measures Rewarding Quality In The Government’s Court NOTES

 
The framework underlying the IOM’s approach is similar to models developed in the private sector, as exemplified by the Leapfrog Group, the National Committee for Quality Assurance (NCQA), and the NQF.² Simply stated, publicly releasing standardized performance measures, accompanied by financial rewards and incentives for higher quality and efficiency, will motivate clinicians and hospitals to improve, which will result in higher quality and lower cost. The motivation to improve is mediated through two pathways. Pathway one has been called the "professional" or "improvement" pathway: Providers with access to good data and the capital to fund changes will be motivated to improve. Pathway two has been called the "consumer" or "accountability" pathway: The threat of losing business to other providers with higher quality ratings, through either consumer preference, benefit design incentives, or regulatory actions, will motivate improvement. The key tasks involved in putting this framework into operation are (1) developing standardized measures that address all six aims set forth in the IOM’s Crossing the Quality Chasm report; (2) publicly releasing these measures in a way that is useful for clinicians and compelling to consumers; and (3) charging consumers and paying providers differentially based on quality and efficiency. The IOM committee wisely recommended two supporting strategies: developing and disseminating information systems to accelerate provider improvement, and creating a practical health services research agenda focused on evaluating different approaches and disseminating best practices. Each task offers opportunities for increased partnership.

Developing Standardized Performance Measures

Top Framework For Improvement Developing Standardized... Publicly Releasing Measures Rewarding Quality In The Government’s Court NOTES

 
The IOM report recommends that the Quality Interagency Coordination (QuIC) task force, a group representing the various agencies involved in federal health care, coordinate a final set of performance measures, but it does not specify their source. The report also recommends that the federal government not "reinvent the wheel" in developing and certifying the measures. More important than who develops the measures is the process by which they are developed, the comprehensiveness of the final data set, and the assurance that the measures will be rapidly and broadly adopted by public and private purchasers and payers. The Strategic Framework Board (SFB), a group of nine people with expertise in quality measurement, reporting, and payment, advised the NQF on a strategy to use measures to drive quality. As part of that framework, the SFB constructed a conceptual model for developing standardized performance measures.³ This model aims to engage providers, quality experts, and consumers in developing standardized measures that are scientifically sound and compelling to the public. The value of the SFB model is that it was developed by an independent group and approved by the NQF, a private-sector organization with both private- and public-sector representatives. The QuIC task force should adopt this framework to drive consistency in measurement development and ultimately decrease the burden of reporting for providers.

A "fine needle to thread." The federal government has a very fine needle to thread as it decides on a core set of measures. On the one hand, providers will understandably object to measures that are inaccurate or not useful. On the other hand, consumers are not likely to use measures that are not compelling to them, regardless of the measures’ technical specifications. Few performance measures are perfect, so difficult decisions will need to be made about which measures to adopt. As in prior IOM reports, patient-centeredness should be a fundamental aim of the health care system. It follows that consumer understanding and protection should be the primary focus of the measures.

A rule of thumb in designing new products or services in the private sector is that consumers should be embraced and stakeholders engaged. Treating consumers and patients as the customer means that they should be involved early and often in the measurement development process. One of the common mistakes that companies make in product design is assuming what customers want without directly speaking to them. Although it might seem intuitive that consumers would be interested in specific measures, not confirming these intuitions is a design for failure.

Engaging providers means that they should be intensely involved in choosing and developing measures, to assure that they are accurate and usable for clinicians. Providers’ performance will be measured and made public, and simple fairness dictates that they should have their say as stakeholders. Also, since the ultimate goal is improved quality and efficiency, only those doing the work can ultimately judge what will be useful for improvement.

Different from the past. This approach would be quite different from the historical process used by the federal government. Consumers and private-sector purchasers would need to be involved at key decision points. Purchasers and consumers want to be consulted with, not just informed about, major decisions that will have an impact on the delivery system in which employees seek care.

Publicly Releasing Measures

Top Framework For Improvement Developing Standardized... Publicly Releasing Measures Rewarding Quality In The Government’s Court NOTES

 
Accelerating use of the measures. This critical part of the improvement strategy plays to the government’s strength as a regulator. The IOM report recommends that the government continue what it has already begun by expanding its publicly released performance measures beyond dialysis units and nursing homes. However, evidence to date has shown little use of measures by consumers, and so determining what it will take to accelerate use is important.

The SFB studied consumers’ usage and found that in addition to the issue of salience discussed above, awareness of quality problems and access to measures are important.⁴ A successful release strategy must increase consumers’ awareness. The CMS and the Leapfrog Group, a private-sector organization representing more than thirty million covered lives, have begun coordinating their messages to consumers about the importance of quality of care, but a comprehensive social marketing campaign may be necessary to raise awareness to needed levels. Developing such a campaign is an opportunity for the QuIC task force to work with private-sector groups.

Getting access to the measures. Surveys show that most consumers do not know how to get access to performance measures when they need them. To date, the CMS has posted measures on its Web site and has alerted consumers to their presence through mass marketing. Successful marketing campaigns stratify consumers and use multiple vehicles to reach different strata. One of the Leapfrog Group’s founding principles is the active dissemination of performance measures to employees and their families. Through their intranets and health plan Web sites, employers are developing strategies to ensure that employees are getting the measures when they need them. As the federal government develops its operating plan, it should seriously consider a more proactive strategy to connect beneficiaries to the measures.

Designing for maximum usefulness. Compelling measures need not only to reflect what consumers are interested in, but also to be in a format that is usable. Most reports to date have not been designed for maximum usefulness for either consumers or practitioners. The SFB recommended that both groups be involved throughout the process and that experts in consumer communication be the primary architects of report formats. Establishing a process to develop user-friendly reports is also an opportunity for the QuIC task force to work in partnership with consumers and other stakeholders.

Rewarding Quality

Top Framework For Improvement Developing Standardized... Publicly Releasing Measures Rewarding Quality In The Government’s Court NOTES

 
Rewarding quality and efficiency and creating incentives for them pose major challenges for federal health programs. The federal government has developed and executed a number of excellent demonstration projects in this area but has not been given the authority to modify its overall payment structures to pay differentially based on quality and efficiency. The CMS struggled unsuccessfully to competitively bid its Medicare+Choice program. Differentiating provider compensation or beneficiary copayments based on quality ratings will likely be even more difficult. Although the IOM report, as well as a Medicare Payment Advisory Commission (MedPAC) report, strongly recommend a pay-for-performance approach, there will likely be strenuous objections from many fronts.⁵ Providers who score poorly on performance measures may nonetheless be licensed and statutorily allowed to see Medicare patients, and they will likely object to anything that interferes with their relationships with patients. Sensitive equity and access issues must be addressed, given federal programs’ roles in providing a safety net for disadvantaged populations.

Private-sector innovations. Since the private sector has more freedom to experiment with differential payments to providers and copayments for employees, the federal government should focus on how to support and build on private-sector innovations. For example, one of Leapfrog’s three founding purchasing principles is rewarding quality. Empire Blue Cross Blue Shield, a New York–based health insurer, worked with four large Leapfrog employers to design a payment system that rewards hospitals meeting Leapfrog criteria. Using actuarial estimates of the savings from the Leapfrog standards, it was decided that hospitals should get 70 percent of the calculated savings, with the balance accruing to employers and their workers. Over the three-year period of the pilot, the hospitals would receive a cumulative surcharge equal to 9 percent of the payments generated from treating enrollees at these companies. If this approach were adopted by private and public purchasers nationwide, the health care system would save in excess of $3 billion, and more than 58,000 lives would be saved.⁶

There are other innovations in progress. In California the Pacific Business Group on Health is working with the NCQA and the Integrated Healthcare Association to develop rewards for providers based on various aspects of quality. General Electric, Ford, United Parcel Service (UPS), and others have developed a pay-for-performance model that will be piloted in Cincinnati and Louisville in 2003. This approach uses an actuarial model to estimate savings from treating diabetics according to evidence-based guidelines and then shares the savings equally between employers and providers. Clinicians who follow the guidelines, verified through certification sponsored by the NCQA and the American Diabetes Association, will receive an extra $100 for each diabetic covered by one of the participating employers. If all purchasers participated, a clinician with 150 diabetics in his or her practice would earn an additional $15,000 per year, and purchasers would save approximately $2.5 billion annually.⁷

Building government support. The federal government can support these initiatives in various ways, even as it asks Congress to change reimbursement rules. Improvement requires investment by providers, and the amount of additional payments for quality is based on the number of purchasers participating. Involvement by the Office of Personnel Management (OPM), state purchasers, or any of the QuIC task force members will be necessary to achieve the needed threshold of dollars to be used for improvement. Also, the CMS is developing a number of Medicare demonstration projects; it should work closely with private purchasers as it develops designs and chooses geographic locations. Demonstrations such as the Medicare Centers of Excellence program in coronary bypass could have had more influence on the delivery system if private purchasers had been partners in the program and adopted some of the payment and measurement methodologies.

In The Government’s Court

Top Framework For Improvement Developing Standardized... Publicly Releasing Measures Rewarding Quality In The Government’s Court NOTES

 
Private-sector employers are interested in a strategic partnership with the federal government, which would take place at the level of the HHS secretary. An influential purchaser advisory board composed of federal, state, and private purchasers and consumers would be the optimal structure to solidify this partnership. This advisory board would need a major voice in reviewing strategy and implementation plans that will affect the delivery system in which employees seek care. The CMS should develop a similar structure, which would also include providers, and should work as much as possible through the NQF.

Unleashing the power of the federal government to break the inertia of the health care system is a positive step, but using that power effectively is crucial, and not easy. A commitment to partnerships with others funding the system, transparent decision-making processes, and patient-centeredness are key to successful execution of its leadership challenge. The opportunity to change our health care system has reached one of its periodic high points. It is now in the government’s court to seize the opportunity.

Editor's Notes

 
Bob Galvin, a physician, is director of global health care at General Electric, based in Fairfield, Connecticut, and associate professor adjunct at Yale School of Medicine. He was a reviewer of the Institute of Medicine’s Leadership by Example report.

NOTES

Top Framework For Improvement Developing Standardized... Publicly Releasing Measures Rewarding Quality In The Government’s Court NOTES

 

1. J.M. Corrigan, J. Eden, and B.M. Smith, eds., Leadership by Example: Coordinating Government Roles in Improving Healthcare Quality (Washington: National Academy Press, October 2002).
2. A. Milstein et al., "Improving the Safety of Health Care: The Leapfrog Initiative," Effective Clinical Practice 3, no. 6 (2000): 313–316; Institute of Medicine, Crossing the Quality Chasm: A New Health System for the Twenty-first Century (Washington: National Academy Press, 2001); and National Quality Forum, A National Framework for Healthcare Quality Measurement and Reporting: A Consensus Report (Washington: NQF, 2002).
3. E.A. McGlynn, "Introduction and Overview of the Conceptual Framework for a National Quality Measurement and Reporting System," Medical Care 41, no. 1 Supp. (2003): I-1–I-7.[Medline]
4. R.S. Galvin and E.A. McGlynn, "Using Performance Measurement to Drive Improvement: A Road Map for Change," Medical Care 41, no. 1 Supp. (2003): I-48–I-60.[Medline]
5. Medicare Payment Advisory Commission, Report to Congress: Applying Quality Improvement Standards in Medicare (Washington: MedPAC, 2002).
6. J.D. Birkmeyer et al., Leapfrog Safety Standards: Potential Benefits of Universal Adoption (Washington: Leapfrog Group, 2000).
7. These are internal General Electric estimates. For more detail, contact the author by e-mail at robert.galvin{at}corporate.ge.com.

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